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Discos Need $10bn Investment to Boost Power Distribution –AFD

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Power - Investors King
  • Discos Need $10bn Investment to Boost Power Distribution –AFD

The 11 power distribution companies operating in Nigeria need $10bn worth of investments to efficiently distribute electricity across the country over a five-year period, the French Agency for Development has said.

AFD disclosed this in a report it presented to operators in the power sector in Abuja on Monday, adding that the $10bn investment would involve new investors and would deliver quality electricity services over the projected period.

Findings and recommendations contained in the report were presented at a conference organised by AFD on Nigeria’s power sector challenges, as the agency stated that it carried out the in-depth study with the support of the European Union in order to contribute and design a way forward for the industry.

“According to the best estimates, the 11 Discos operating in Nigeria would need more than $10bn in five years. Also, innovative financing solutions must be devised, possibly involving new players,” the study, which was done by a consultancy firm, AF Mercados, under the AFD’s Technical Assistance Programme, stated.

In a presentation that was made at the conference, the Team Leader of Capacity Building and Technical Assistance Programme, AF Mercados, Jose Guerra, said the aim of the study was to help empower decision-makers in making the right decisions in Nigeria’s power sector.

The French agency noted that the AFD along with other development institutions involved in supporting the power sector in Nigeria had been witnessing the stall of investments in the sector since it was privatised.

It stated that this had led to the build-up of a major bottleneck, constraining access to electricity for the public and the economy, driving up the cost for users who now resort to diesel-powered generation.

It said the failed attempts at financing Discos led the Federal Government and its development partners to think out ways of breaking the vicious cycle that started from an initial infrastructure gap and led to today’s severe liquidity crisis with a revenue shortfall that is over $3bn.

The AFD report traced causes of the shortfall in the sector to the lack of a cost reflective tariff, customer dissatisfaction and lack of performance in the power sector in general, as these had led to a shutdown of access to finance.

In conducting the study, AFD said Mercados worked closely with stakeholders in the sector including the Discos since mid-2017, following the guidelines of the Performance Improvement Plans released by the Nigerian Electricity Regulatory Commission.

The study also highlighted key actions to be taken to solve the liquidity crisis in the sector such as segmenting the electricity market into manageable urban areas, rural areas, and potential eligible customers.

The other segmentations were informal settlements in urban areas and peri-urban areas, and the difficult to manage rural areas.

The report further talked about analysing the cost and revenue structure of the Discos on the various segments, as well as appropriate data that would help in valuing the needed investment linked to key performance targets to help in forming the PIP of each Disco as required by NERC.

The development partner, however, emphasised that there was a need to set up consistent legal and regulatory frameworks that would attract investors to sustain the power sector.

The study noted that there was a need for more investments rather than interventions by the Central Bank of Nigeria in the electricity market.

It noted that N600bn had been earmarked as the second tranche of the CBN’s Nigeria Electricity Market Stabilisation Fund starting this year or by 2020.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Economy

Nigeria’s Inflation Rate Declines to 17.01 Percent in August 2021

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Prices moderated further in Africa’s largest economy, Nigeria, in the month of August despite rising costs and growing economic uncertainties.

Consumer Price Index (CPI), which measures inflation rate, grew by 17.01 percent year-on-year in August 2021, representing a 0.37 percent decrease when compared to the 17.38 percent recorded in the month of July 2021.

On a monthly basis, inflation rate increased by 1.02 percent in August 2021, slightly higher by 0.09 percent than the 0.93 percent filed in July, the National Buruea of Statistics (NBS) stated in its latest report.

Prices of goods and services continued to drop on paper in recent months even as costs are hitting record highs across most sectors in Nigeria.

Naira has plunged to a record-low against the United States Dollar and other global currencies following the Central Bank of Nigeria’s decision to halt sale of forex to Bureau De Change Operators in an effort to curb illicit financial flows and forex supplies to the black market.

Naira plunged to N560 per United States Dollar at the black on Wednesday to set a new record low against the greenback and subsequently dragged on cost of import goods and profit of import dependent businesses.

Food Index also rose at a slower pace in August 2021 even with Nigerians complaining of over 50 percent increase in the price of food items. Food composite index rose by 20.30 percent in August, at a slower pace when compared to 21.03 percent recorded in the month of July 2021.

The rise in food index were caused by increases in prices of Bread and cereals, Milk, cheese and egg, Oils and fats, Potatoes, yam and other tuber, Food product n.e.c, Meat and Coffee, tea and cocoa, according to the NBS report.

On a monthly basis, the food sub-index grew by 1.06 percent in August 2021, representing an increase of 0.20 percent from 0.86 percent filed in the month of July 2021.

Looking at a more stable food index guage, the twelve-month period ending August 2021 over the previous twelve-month average, food index increased by 0.34 percent from 20.16 percent achieved in July 2021 to 20.50 percent in August 2021.

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Glo to Reconstruct 64km Ota-Idiroko Road Using Tax Credit Scheme – Fashola

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Mobile telecommunications giant, Globacom, has offered to reconstruct the 64 km Ota-Idiroko road in 2022, using Federal Government’s Tax Credit Scheme.

The Minister of Works and Housing, Mr. Babatunde Fashola, announced this on Wednesday during an inspection tour of the ongoing reconstruction of the Lagos-Ibadan Expressway.

“From Ota to Idiroko, we don’t have a contract there, but Chief Mike Adenuga of Globacom has offered to construct that road using the tax credit system.

“So, that has also started, they are doing the design, and hopefully, by sometime early next year, they should mobilize to site. The real reconstruction is going to happen if we have a deal with Glo,” Fashola said.

He said that FERMA would carry out rehabilitation works on the Ota-Idiroko road between October and December.

“But between now and December, FERMA has gone to take measurements there and they will move there from the end of September if the Ogun State Government does two things.

“Clear all the squatters, traders, and the settlers on the road and help us manage traffic and the governor as at last night has committed to doing that for us,” the minister said.

He said efforts were on to bring in Flour Mills of Nigeria Plc and Unilever to reconstruct the Badagry link to the Lagos-Ota-Abeokuta road under the Tax Credit Scheme of the Federal Government.

The minister said that the Lagos-Ota-Abeokuta road had become a problematic road due to years of neglect by previous administrations, as such the highway required a huge investment.

He commended Gov. Dapo Abiodun for his passion for fixing roads in Ogun State, adding that the reconstruction of the failed portions of the Lagos-Ota-Abeokuta road would be completed by December at the cost of N13. 4 billion.

The minister added that the project would be handled by the Federal Road Maintenance Agency (FERMA).

He called on federal lawmakers representing Lagos and Ogun States to ensure increased budgetary allocation for the roads to ensure their speedy completion to ease the hardship on road users.

“When people say Fashola is looking away, I am not looking away, I just can’t find the money,” he said.

He also called for support of citizens for parliamentarians to ensure more borrowing for infrastructure upgrades because the future depends on development strides today.

Also speaking during the inspection tour, Gov. Dapo Abiodun of Ogun said that the project became necessary because Ogun is the industrial hub of the nation that needed good roads for interconnectivity to boost commerce.

He said: “We have given the commitment that we will relocate traders, we will control and manage traffic, whatever that it is we need to do, we will ensure that we begin to bring succor and needed relief to our people.

“The state of that road today is pitiable. I went on that road myself and I felt bad for our citizens.”

Abiodun said the state government was ready to borrow to reconstruct the Lagos-Ota-Abeokuta Road should there be a delay in the Sukuk funding for the highway.

“If this Sukuk bond would not happen immediately, the state government is willing to go and borrow against that promise so that we can mobilize the contractor,” he said.

He thanked Fashola for the efforts to reconstruct roads in the state and pledged the support of the state government in fixing the highways.

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Lagos Eyes $60M Investment, as Sanwo-Olu Signs Green Bond Market Agreement

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Lagos State becomes the first sub-national government to activate the framework for the unlocking of the $1 trillion Nigerian Green Bond Market Development Programme to finance key infrastructure projects.

On Tuesday, Governor Babajide Sanwo-Olu signed a Memorandum of Understanding (MoU) with FMDQ Group and Financial Sector Deepening (FSD) Africa, which are the programme’s implementing partners on the proposed N25 billion (over $60 million) financing.

The historic event, held at the State House in Marina, came less than 24 hours after Lagos was upgraded to AAA(nga) rating from AA+(nga) by Fitch International for the State’s good standing on debt sustainability and resilience.

Sanwo-Olu said the green bond programme, which is supported by the UK Agency for International Development (UK Aid), would raise the capacity of the State Government to deliver more key infrastructure and social projects that would keep Lagos on the path of prosperity.

Launched in 2018, the Green Bond Market Development Programme is to facilitate the development of a green bond market to support broader debt capital markets reforms that will impact the sovereign and non-sovereign bond markets in the country.

The programme is to empower State Governments to champion sustainable finance for development.

Sanwo-Olu said the MoU was the crucial first step being taken by Lagos towards creating viable financing options for future green and sustainability projects. The funding opportunity, he said, will advance the adoption of innovation and technologies to provide green jobs, thereby promoting economic and climate resiliency.

He said: “As a Government, we are committed to utilising our limited resources more efficiently to create a circular economy, which is a promising and viable alternative. Public spending and investments may not be enough to deliver our key objectives; therefore, the need to tap into more private investments for the transition to a zero-waste and circular economy, as well as achieving crucial items of the Sustainable Development Goals (SDGs).

“I strongly believe that the Green Bond programme will open the doors of deeply sustainable funds for infrastructure and social development for Lagos. Being the biggest player in the sub-national capital market, Lagos’ experience can open new doors for a lot of others. As a State, we embrace the transparency and commitment that comes with a Green Finance framework. We believe it sends an important signal to investors in the market about who we are: a State that is fiscally responsible, prudent and disciplined.”

Sanwo-Olu said Lagos’ credentials in investment sustainability made the State take the bold step to activate the framework to benefit from the programme.

He said the initiative would go a long way in ensuring that key deliverables in his administration’s T.H.E.M.E.S agenda are actualised while pledging that the State would continue to blaze the trail of leadership, financial accountability, innovation and sustainability.

Special Adviser to the Governor on SDGs and Investment, Solape Hammond, said the journey to get the framework approved started last year, disclosing that the MoU highlighted key projects to be delivered by the State Government to actualise economic sustainability.

She said the finance would be invested in green projects, adding the implementing partners had created a mechanism to ensure funds earmarked were disbursed judiciously.

Commissioner for Finance, Dr Rabiu Olowo, said Lagos had 20 years of experience in raising bonds, assuring implementing partners and capital market operators of the State’s commitment to the terms highlighted in the framework.

Chief Executive Officer of FMDQ Group, Bola Onadele, said Lagos had built a reputation and “incredible potential” for catalysing broad-based sustainable development, which explained the partners’ readiness to support the State in unlocking the capital to fund key projects.

He said: “ I have no doubt that the implementation of this MoU and the impact thereof will ensure that Lagos continues to set itself apart, support its developmental aspirations and highlight its sustainability efforts at the global green and sustainable financial ecosystem. We are excited about this opportunity to support the developmental aspirations of Lagos.”

Also, FSD Africa CEO, Mark Napier, saluted the Governor’s energy and his commitment towards providing infrastructure which future generations can rely on.

He said: “It’s truly a significant event that the economic powerhouse of Africa’s largest economy is signing the green bond investment and I can say this is leadership being demonstrated by the Lagos State Government. I expect other States to follow this path.”

The high point was the signing of the MoU by all parties under the supervision of the State Attorney General and Commissioner for Justice, Moyo Onigbanjo, SAN and witnessed by the British Deputy High Commissioner, Ben Llewelly-Jones.

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